Wednesday, December 05, 2012

On November 26, Seth Cooper and
I filed comments
in the FCC's proceeding evaluating the proposed merger between T-Mobile USA and
MetroPCS. In the comments we said:

"By
combining MetroPCS's spectrum, wireless infrastructure, and other resources
with its own, T-Mobile seeks to speed up and expand its deployment of 4G LTE
services to meet growing demands for data-rich wireless broadband services.
Consumers stand to gain from a more rapid migration to next-generation wireless
services resulting from the proposed merger."

Consistent
with our usual practice, we did not specifically endorse the proposed
transaction as a bottom-line matter. But we did conclude that, "considered
in a proper analytical framework, this proposed combination will likely improve
the competitive standing of T-Mobile/MetroPCS in reaching wireless consumers
across the nation and thus serve the public interest."

The
Communications Workers of America has submitted comments
arguing the FCC should not approve the transaction absent imposing certain conditions
to protect the jobs of its members. Specifically, CWA wants the Commission to
adopt the following "enforceable" conditions: (1) No U.S. employee
will lose a job as a result of the transaction; (2) Network maintenance will
continue to be provided by U.S. employees; and (3) Work previously sent
offshore by T-Mobile and MetroPCS will be returned to the United States. CWA is
especially concerned that the merger applicants claim the combination will
allow them to achieve certain "synergies" and
"efficiencies," which CWA says are euphemisms for job losses.

No
one wants to see people lose jobs, especially in today's difficult economy. I
certainly don't. Nevertheless, CWA's request for job protection conditions is
out of place in the merger proceeding.

It is
true that FCC decisions can impact the overall economy and jobs. Regulations
that are unduly costly or overly burdensome will deter investment and innovation,
adversely impacting job creation, at least over time. Conversely, sound
regulatory policies, if they are narrowly tailored to redress real market
failures and demonstrable consumer harm, and if they are subject to rigorous
cost-benefit analysis, may have a positive impact on investment and innovation,
thereby promoting job creation over time.

But
acknowledging that FCC actions may have a positive or negative impact on the
nation's economy and employment levels is a far cry from acknowledging the
Commission should be in the business of sanctioning job protection plans in
connection with its merger reviews.

It
should not be.

We already
have a Department of Labor in the government, and the FCC should not abuse its merger
review process by acting as if we need another one.

There
is an increasingly broad consensus that the FCC, especially in recent years, abuses
its merger review authority by extracting various "voluntary"
conditions from the merging parties before it will approve the proposed
transaction. Because the merger applicants, often held in limbo awaiting
Commission action for up to a year, are at the Commission's mercy, it is easy
for the agency, employing the indeterminate public interest standard, to
extract the last-minute "voluntary" conditions. And the worst part is
that the so-called voluntary conditions may have little or no relationship at
all to the claimed competitive effects of the proposed merger.

Carried
out in this way, with the Commissioners or their staffs suggesting, with a wink
and a nod, that it might be "helpful" if certain conditions are
proffered, the merger review process has an unseemly air about it. Several
years ago I called the process a "bizarre
bazaar," and I didn't mean it as a
compliment. Over twelve years ago, I proposed reforms to the review process in
a Legal Times piece, aptly titled, "Any
Volunteers?" And in 2005, this National Law Journal piece titled "Reform
the Process" argued for reform of the review
process.

Ultimately,
what is needed are Communications Act revisions that restrict the FCC's merger
review authority so the Commission does not duplicate the work of the antitrust
authorities, or that at least require the agency largely to defer to the
antitrust agencies' expertise. The FCC's authority should be limited to
ensuring that, if the merger is to be approved, the post-merger entity will be
in compliance with all existing statutory and regulatory requirements.

But
what is needed in the short-term, indeed right now, is for the FCC to exercise
regulatory self-restraint. This means the agency should reject special pleading
like CWA's (or anyone else's) to hold the merger hostage to extraneous
conditions. While the CWA is correct that, on at least one past occasion, the
FCC succumbed to pressure (or the temptation) to include a jobs protection provision
(a requirement to repatriate jobs that had been outsourced) as a merger
condition, it should not do so again.

As I
said above, there is no gainsaying that the FCC's regulatory policies may
impact job creation, for good or for ill. Regulatory policies that are narrowly
tailored and properly limited to ensure that their costs do not exceed their
benefits may, in instances of real market failure, be consistent with job
creation.

If
the FCC unwisely wants to venture into the domain of considering job protection
plans, for example, plans that prohibit offshoring or that require that no U.S.
employee lose his or her job, the agency should do so only in the context of an
industry-wide generic proceeding. I would vigorously oppose the adoption of
such rules as surely harmful and most likely unlawful, but at least the FCC
would not be singling out particular parties in the context of a merger
proceeding.

In my
view, in the context of the current market environment, I see no reason for the
FCC to stand in the way of the proposed T-Mobile-MetroPCS merger. But I readily
confess I have no idea whether, in this specific instance, the efficiencies and
synergies claimed by the applicants will result, ultimately, in more or less
jobs for CWA workers. I suspect that, over time, if the combined entity proves
to be a strong marketplace competitor – stronger than if T-Mobile and MetroPCS
remain apart – more jobs will be created than lost.

Be
that as it may, the FCC has no business abusing its merger review authority by conditioning
the merger on adoption of the job protection plan put forward by the CWA.
Regardless of whether the Commission has abused its authority this way in the
past, such a condition is simply too far afield from any legitimate view of the
Commission's exercise of its merger review responsibilities.